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PS 94(1)

Purchases of Containers and Packaging Materials by
Packers, Shippers and Fulfillment Houses

PURPOSE: This Policy Statement describes the proper application of the resale exclusion from sales and use taxes to purchases of containers and packaging materials by packers, shippers and fulfillment houses.

BACKGROUND: Packers, shippers and fulfillment houses prepare merchandise belonging to their customers for shipment. Such preparation may involve, but is not limited to, the following activities: selecting the items to be shipped as designated by the customer, wrapping or otherwise packaging the items of merchandise, placing a set quantity of pieces in larger containers, adding materials that will protect the merchandise from damage during shipment, and loading the finished packages onto vehicles or vessels or arranging to have the finished packages shipped as directed by the customer.

STATUTORY AUTHORITY: Conn. Gen. Stat. Section 12-410 provides that property may be purchased on a resale basis when the purchaser, at the time of purchase, intends to sell the property in the regular course of business. If a purchaser who has purchased property under a resale certificate makes any use of the property other than retention, demonstration or display while holding it for sale in the regular course of business, such use shall be deemed to be a retail sale by the purchaser at that time and the purchaser must pay the sales tax on the gross receipts.

EFFECTIVE DATE: Effective upon issuance.

PROPERTY USED TO CONDITION GOODS FOR SHIPMENT OR TO PRESERVE OR PROTECT THE GOODS DURING SHIPMENT: Packers, shippers and fulfillment houses (hereinafter collectively called "shippers") purchase tangible personal property to be used in conditioning the goods to be shipped and to preserve, protect and contain the goods during transportation. Such property includes, but is not limited to, the following:

  • bracing materials
  • car strips
  • cleaning compounds
  • degreasing compounds
  • derusting compounds
  • dunnage or "loose lumber" (e.g., used in vehicle or vessel to brace and protect freight or cargo during shipment)
  • gas (including dispensers)
  • ice and dry ice
  • miscellaneous preservatives
  • rust preventing compounds
  • salt
  • solvents
  • tarpaulins (weather protection)

Tax applies to purchases by shippers of property used to condition the goods to be shipped, or to preserve and protect the goods during transportation, because shippers are the consumers of such property in performing their service. It is immaterial whether or not a separate charge or separate billing is made by the shipper for the particular item, that it may not be returned to or reused by the shipper, that the goods are shipped in interstate or foreign commerce, or that the shipper's contract is with an exempt entity, such as the State of Connecticut or the United States. The property is purchased by the shipper for a purpose other than resale, i.e., conditioning the goods, or preserving and protecting the goods during shipment. Thus, the sale to the shipper is a retail sale, even though the shipper may later transfer title to the property it uses in fulfilling its contracts.

PROPERTY USED AS CONTAINERS OR AS PARTS OF CONTAINERS: Shippers also purchase tangible personal property to be used to contain the goods during transportation. Such property includes, but is not limited to, the following:

  • bags
  • barrels
  • bottles
  • boxes
  • cans
  • carboys
  • cartons
  • crates
  • cylinders
  • drums
  • excelsior and other packing and crating material, used as cushioning or padding inside containers to protect fragile articles
  • gummed tape
  • kegs
  • labels
  • lumber (including "loose lumber" used in the same manner and for the same purpose as pallets)
  • pallets
  • sacks
  • strapping
  • twine
  • wrapping paper

Except as provided below, when the prerequisites for the resale exclusion have been met by the shipper, the sale to the shipper of property used as containers or as parts of containers is a taxable retail sale.

PURCHASES BY SHIPPERS ON RESALE: When ALL of the following conditions exist, the shipper may purchase property used as containers or parts of containers on a resale basis by giving a resale certificate to the supplier of the property:

  • the shipper expressly contracts with the customer for the sale to the customer of the container or container material;
  • the shipper makes a separate charge for the container or container material;
  • title passes from the shipper to the customer before any use of the container or container
  • material is made by the shipper; and
  • there is no understanding or trade custom that the property will be returned to the shipper for reuse.

SALES BY SHIPPERS UNDER CONN. GEN. STAT. Section 12-412(14)(A): If the goods being shipped will be sold by the shipper's customer, the sale of the containers and parts of containers by the shipper to its customer will be exempt under Conn. Gen. Stat. Section 12-412(14)(A), which exempts sales of "nonreturnable containers ... when sold without the contents to persons who place the contents in the container and sell the contents together with the container." In such cases, where title to the containers has passed from the shipper to its customer prior to any use of such containers, the shipper acts as the agent of the customer in placing the contents inside the containers.

EFFECT ON OTHER DOCUMENTS: Rulings 89-17 and 90-81 are hereby modified to the extent that they are not in accord with this Policy Statement.

EFFECT OF THIS DOCUMENT: A Policy Statement is a document that explains in depth a current Department policy or practice affecting the liability of taxpayers. Unlike a Letter Ruling, a Policy Statement does not apply a policy or practice to a specific set of facts but it may be referred to for general guidance by taxpayers. Unlike a Special Notice, it does not announce a new policy or practice in response to changes in state or federal laws or regulations or to judicial decisions.


FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.

Electronic Delivery Options: You can also obtain tax forms and publications 24-hours a day from our Web site. Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.

PS 94(1)
Sales and use taxes
Issued: 2/28/94